FINRA Dispute Resolution Proposes Raising Threshold for Three-Arbitrator Cases
Single Public Arbitrator to Hear Investor Cases of up to $100,000 in Dispute, up from $50,000
New York — The Financial Industry Regulatory Authority (FINRA) today announced it has filed a proposed rule change with the Securities and Exchange Commission to have investor cases with claims of up to $100,000 in dispute heard by a single public arbitrator, an increase from $50,000.
One arbitrator would be assigned to cases involving $25,000 to $100,000, under the proposal, unless all parties in arbitration agree to a three-person panel. Claims of $25,000 or less would continue to be heard by a single arbitrator, while three would continue to be assigned to cases involving more than $100,000 in dispute.
"As more claims are heard by one arbitrator, we further simplify and streamline the dispute resolution process," said Linda Fienberg, President of FINRA Dispute Resolution. "It is much easier to appoint one arbitrator than three, and these efficiencies multiply when we schedule and conduct prehearing conferences and evidentiary hearings."
Parties would experience reduced processing times because single-arbitrator cases historically are concluded more swiftly than three arbitrator cases. Also, in the arbitrator selection process, parties would research the disclosures and histories of only eight proposed arbitrators, rather than 24 proposed arbitrators. Arbitrators also would have more flexibility in setting conference calls and hearing dates.
The proposed threshold change comes during a rise in the number of arbitration claims filed with FINRA Dispute Resolution. Through mid-September 2008, FINRA has received 3,203 arbitration case filings, compared to 2,226 cases for the same period in 2007, a 44 percent increase. Claims initiated by customers have increased by 67 percent during this period.
If approved, the new rule is estimated to double the percentage of cases heard by a single arbitrator - from approximately 17 percent to 34 percent - and would restore this figure to what it was when the three-arbitrator threshold was last increased in 1998.
FINRA Dispute Resolution is the largest securities dispute resolution forum in the world. It facilitates the efficient resolution of monetary, business, and employment disputes between investors, securities firms, and employees of securities firms by offering both arbitration and mediation services through a network of hearing locations across the United States. It currently maintains a roster of approximately 6,500 arbitrators and conducts arbitrations in 73 hearing locations in the United States and abroad.
FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. Created in 2007 through the consolidation of NASD and NYSE Member Regulation, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business-from registering and educating all industry participants to examining securities firms; writing and enforcing rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit our Web site at www.finra.org.